Truth, lies and the farmer

The Latvian government is taking measures to protect Latvian agriculture. A state intervention agency is being formed to buy sugar beets from farmers because the sugar manufacturer Jekabpils Cukurfabrika cannot do it anymore. An anti-dumping law is in the process of being reviewed by the committees. Import charges for pork are unlikely to disappear soon.

Free trade agreements with European Union and World Trade Organization members and a number of other countries imply free trade in all goods except textiles and agricultural products. And although the gradual liberalization of trade in these sectors is planned, the current economic situation does not suggest it is going to happen within this government's lifetime. If anything, agricultural trade seems to become less, rather than more, liberal. Pork import tariffs were, for example, applied even to our Baltic neighbors, with whom Latvia has a separate free trade agreement without agricultural exception.

Latvia calls its protectionist trade policy a set of safeguard measures to protect the local producer, and silences our vexed neighbors and impatient friends in the EU and WTO by calling the measures temporary.

And officially, of course, they are.

"The primary goal of safeguard measures is to give time for the respective local production facility to get adapted to the growing conditions of competition it will have to face after the term of safeguard measures ends," reads the Economics Ministry report on economic development.

Latvia does not protect its domestic markets from foreign competition, it just needs a little bit of time to get used to it.

It is, however, highly doubtful that Latvian agriculture, given several months usually implied by the term of safeguard measures - or even a couple of years, if these terms are extended - will emerge any more competitive.

Agriculture is not slightly under the weather because of the sudden influx of imports. It is seriously unfit for international competition, and building up its strength and stamina will take a lot of painful effort.

First of all, the sector is operating with technologies and machinery that the rest of the world has forgotten like a bad dream. Its productivity figures would cause shudders among our EU competitors: 15.7 percent of the total workforce employed in agriculture contributes no more than 3.6 percent to total GDP. The added value per person employed is thus 10 times smaller than in the EU.

A country with just under 2.5 million people and a still significant proportion of land employed for agriculture cannot produce enough foodstuffs to feed itself. Our trade balance in agricultural products is negative, and has been deteriorating year on year since at least 1990.

The infamous pork production, which constitutes almost half of total meat production, satisfies no more than one-fifth of the domestic market's needs.

Dairy is the only branch of agriculture where domestic producers fully satisfy their small domestic market and even manage to sell some abroad - mostly because the Latvian soil is particularly favorable to high harvests and effective cultivation of meadows and pastures.

Ironically, in this area we seek experience from Israel, which achieved success in dairy farming despite, not because of, the natural conditions.

Problems of Latvian farmers stem partly from there being too many of them. Most meat, milk and cereal are produced by small farms where the old-fashioned manual methods seem to work best and purchasing high-tech equipment is not only forbiddingly expensive but also irrational. On a plot of land no more than five hectares large - and most crop producers have only that much land at their disposal - a farmer can never grow enough crops to justify the purchase of an expensive piece of advanced equipment. And the government can never supply enough of this equipment to satisfy every small farmer.

A drop of 55 percent of agricultural production volumes since 1990 suggests that the outright dismantling of big farmer communes may have been a mistake.

Now that a lot of rural land is privatized in small plots, it may be very hard to go back to efficient large-scale agricultural production that would make Latvian farmers able to compete with their European counterparts.

Meanwhile the WTO and EU are frowning at our protracted safeguard measures and tap nervously on the table waiting for Latvian agriculture to show its face from behind the veils of tariffs. One wonders what they expect to see. Maybe we should tell them the truth?

Diana Kudayarova, a Riga native and current student at Harvard University, is a guest columnist for TBT.